For China’s middle class, ‘new retail’ unicorn startups offer higher-quality lifestyles and shopping
‘New retail’ is changing the consumer experience, and retail unicorn companies in China are successfully tapping that trend. These observations were made at a closed-door talk on 14 June in Tokyo by Styler Inc CEO Tsubasa Koseki and Nihon Bishoku (Japan Foodie) CEO Lu Dong. They spoke in-depth about China’s retail environment, where the online and digital worlds continue to integrate.
At the event, Koseki and Lu introduced several ‘new retail’ unicorn companies in China. What has set these billion-dollar startups apart and led to their success is how they’ve implemented OMO (online-merge-of-offline) systems and adopted similar marketing strategies.
As Lu put it, more retail companies in China are looking for business opportunities offline. “The cost in China for a large-scale online store to capture new customers has skyrocketed 10-fold within the past year. Up until recently, online businesses had been growing faster than offline, but now in China, we’re starting to see the opposite happening.”
A closer look at ‘new retail’ unicorns
One ‘new retail’ unicorn company is Alibaba Group’s supermarket chain Hema. The chain allows customers living within a 3-km radius of their stores to have orders delivered within 30 minutes, even if bought online. Hema’s system truly breaks down the wall between online and offline. Customers can easily place an order from their phones in-store and have them delivered to their door later. Typically, Chinese consumers tend not to trust supermarkets for fresh produce. Hema thus fills a void for consumers who want high-quality food, even if it means paying more.
A famous unicorn is Yitiao, formerly large video dissemination and content production service before it ventured into retail. By putting its content-creation abilities to use in retail, it has been able to expand into selling products online and in offline stores. With its high-quality, lifestyle-related videos, Yitiao targets the needs and purchase intentions of China’s aspiring middle class, whose incomes continue to rise and who are always on the lookout for what to spend their money and time on. All information about Yitiao’s in-store products is available online and can even be found in-store with QR codes. Yitiao treats its brick-and-mortar stores as another customer channel; it collects data on in-store traffic, which products customers are scanning and what they’re buying.
Another new retail unicorn in the fashion industry is the fast-fashion brand Urban Revivo, otherwise known as UR. Its test stores feature clothes hangers with built-in sensors: The moment an item is picked up, a QR code flashes on a signboard. Customers scan this code to get information on the product, forgoing the need for explanations from staff.
Also discussed was Zaozuo, a furniture retail unicorn that has adopted OMO to a very high degree. With QR codes attached to in-store furniture, users can obtain a wide array of product information, such as layout suggestions. By creating offline stores that thoroughly harness IT capabilities, Zaozuo has broken the ‘old retail’ status quo.
China’s ‘new retail’ landscape
While old retail is tied up with the KPI of sales per square foot, new retail in China is taking a different approach. For instance, new retail companies are well versed in IT and digital policies and can store data, such as a customer’s home address and desired products. QR codes and online stores act as ‘entry points’ for this data.
Lu explained, “What’s most important for new retail is the user, never the product. At the heart of the new retail business model is the fusing of online and offline to raise convenience for customers while also securing LTV (Life Time Value).”
What came through at the event was the strong influence of China’s ballooning middle class. To cater to the desires of this demographic, many new retail unicorns successfully maintain a vast quantity of rich online content.
Middle-class Chinese have overcome many problems in their lives and now want to live more comfortably. New retail companies can answer these needs with great online content and deluxe experiences inside their brick-and-mortar stores. What will further accelerate this growth is the use of smartphones among the Chinese, many of whose first experience with the internet was with a smartphone, not a PC. Today, like much of the world, the Chinese can connect online anytime, no matter where they are, with smartphones and QR codes.
What’s important is discovering the products customers will happily buy and in which situation. For other retail players, it will be worth seeing what the success stories of China’s ‘new retail’ unicorn companies can teach us.
Text: Denyse Yeo
Original text (Japanese): Jonggi HA
